Bitcoin (BTC) Wealth has Become More Evenly Distributed with Smaller Accounts Holding Greater Proportion of Supply: Report

In the eleven years of its existence (since the dismantling of the first Bitcoin block), BTC has survived many "threats", mainly because there is not a single entity that controls the world's largest cryptocurrency network. As explained in a report by Coin Metrics, this characteristic, known as decentralization, includes “a large number of loosely coupled characteristics”.

For example, the distribution of wealth is one of the key factors in any type of economy. The extent of wealth distribution should determine the degree of economic influence that individuals or organizations could have. For digital assets that have given the founders of such projects relatively large token allocations, this is also a "heavily researched" aspect of so-called decentralized cryptographic currencies, according to the information Coin metrics.

The distribution of hash power, or the amount of computing power that secures a digital currency network, could be an even more important or more important factor to consider when analyzing crypto platforms, according to Coin Metrics. Bitcoin "relies on decentralization at this level in order to achieve its goals of maintaining a secure, censorship-resistant payment and savings system," said the Coin Metrics report.

It adds:

"Bitcoin is also heavily exposed to the market share distribution from exchanges, which have an overwhelming impact on the network's economy. The distribution of the volume among Fiat-listed spot pairs is particularly important as these represent entrances and exits to and from the world as a whole. "

The report also notes that the presence of whales or crypto investors with very large amounts of digital assets in their wallets continues to be a problem for the "viability of many cryptocurrencies". According to Coin Metrics, "unequal distribution of funds" can result in a relatively small number of users exerting too much influence on the markets of a crypto-asset and its ongoing protocol development. This would "call into question the profitability of the asset as a store of value or a medium of exchange," the report said.

It also mentions:

“Bitcoin still has whales, but since the network was founded, its supply has been more evenly distributed, with smaller accounts becoming an increasing share of the overall supply. Addresses with smaller balances continue to represent the majority of accounts. In the face of fluctuating US dollar prices, most addresses control Bitcoin worth less than $ 100. "

Bitcoin's decentralization also depends on the distribution of computing power or hash power among the BTC miners.

As explained by Coin Metrics:

“Bitcoin relies on miners to secure the network and add new blocks to the blockchain. These miners compete for the next block by computing large numbers of energy-intensive hashes, and often aggregate into loose coalitions known as mining pools. "

They also confirm that the amount of hash power securing the BTC blockchain network has increased "exponentially" over the course of the cryptocurrency network.

The report adds that the degree of hash power distribution is also important for a crypto network. This is because a bad actor who controls more than half of a cryptocurrency network's hash power could launch a 51% attack and double spend more than once or spend the same set of funds. A malicious attacker with fewer resources may still be able to censor certain crypto transactions using "suspension forks," explains Coin Metrics.

The report further states:

“An attacker would have to double spend a large amount of money to make a 51% attack profitable. For ASIC coins with majority hash power such as Bitcoin, which require significant investment from miners, it would be difficult for a rational miner to conduct a 51% attack, although the presence of marketplaces for hash power makes those attacks a little more workable. "

According to Coin Metrics' analysis, the Bitcoin (BTC) mining sector remains “competitive”. The report claims that BTC mining is now "a thriving, distributed ecosystem".





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